Do investors care about noise trader risk?
The link between investor sentiment and asset valuation is at the centre of a long-running debate in behavioral finance. Using a new composite sentiment indicator, we show that the conventional risk does not explain the abnormal returns of portfolios most sensitive to the sentiment factor. Our result supports the existence of a sentiment risk valued by financial markets. We also find that the firms more impacted by the sentiment risk correspond to difficult to arbitrage and hard to value stocks, e.g. small stocks, growth stocks, young stocks, unprofitable stocks, lower dividend-paying stocks, intangible stocks and high volatility stocks.
|Date of creation:||Oct 2011|
|Date of revision:||Dec 2011|
|Contact details of provider:|| Postal: 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France|
|Order Information:|| Postal: Angèle Renaud, CREGO, 2 Bd Gabriel, BP 26611, 21066 Dijon Cedex, France|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- De Bondt, Werner P. M., 1993. "Betting on trends: Intuitive forecasts of financial risk and return," International Journal of Forecasting, Elsevier, vol. 9(3), pages 355-371, November.
- De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990.
"Noise Trader Risk in Financial Markets,"
Journal of Political Economy,
University of Chicago Press, vol. 98(4), pages 703-738, August.
- J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, "undated". "Noise Trader Risk in Financial Markets," J. Bradford De Long's Working Papers _124, University of California at Berkeley, Economics Department.
- De Long, J. Bradford & Shleifer, Andrei & Summers, Lawrence H. & Waldmann, Robert J., 1990. "Noise Trader Risk in Financial Markets," Scholarly Articles 3725552, Harvard University Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:dij:wpfarg:1111201. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angèle RENAUD)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.